## Facts

- Current and former Northwestern University employees participated in two ERISA-governed § 403(b) defined-contribution retirement plans in which participants selected investments from options chosen by plan fiduciaries.
- Participants alleged fiduciaries breached ERISA’s duty of prudence by:
  - Failing to monitor and control recordkeeping expenses, causing unreasonably high fees.
  - Offering higher-fee retail share classes when materially identical, lower-fee institutional share classes were available.
  - Maintaining an allegedly confusing and needlessly complex investment lineup.
- The district court dismissed for failure to state a claim.
- The Seventh Circuit affirmed, reasoning that the plans’ broad menu included low-cost options and that participants had ultimate control over their investment choices, which defeated the prudence claims as a matter of law.

## Issues

1. Whether ERISA duty-of-prudence claims may be dismissed at the pleading stage on the ground that a plan offered many options, including low-cost alternatives, and participants ultimately chose their investments.
2. Whether assessing plausibility of ERISA prudence claims requires a context-specific inquiry into fiduciaries’ ongoing duty to monitor investments and remove imprudent ones.

## Decision

- The Supreme Court vacated the Seventh Circuit’s judgment and remanded.
- The Court held the Seventh Circuit erred by treating participant choice and the availability of some prudent options as categorically excusing allegedly imprudent fiduciary decisions.
- The Court instructed reconsideration of the complaint as a whole under the proper, context-specific standard, including fiduciaries’ continuing duty to monitor and remove imprudent investments.

## Legal Principles

- ERISA requires fiduciaries to act with the care, skill, prudence, and diligence that a prudent person would use under the circumstances then prevailing.
- Fiduciaries have a continuing duty to monitor plan investments and remove imprudent ones, separate from the duty at initial selection.
- The existence of a broad, diverse lineup that includes prudent or low-cost options does not, by itself, defeat claims challenging other options, share-class choices, or allegedly excessive fees.
- Even in participant-directed defined-contribution plans, fiduciaries must independently evaluate which investments and services may prudently be included and retained.
- Whether a complaint plausibly alleges imprudence is a context-specific inquiry not resolved by categorical rules at the motion-to-dismiss stage.

## Conclusion

The Court required lower courts to evaluate ERISA duty-of-prudence allegations through a context-specific plausibility analysis and rejected the view that participant control or the presence of some prudent options automatically insulates plan fiduciaries from claims about other allegedly imprudent investments or excessive fees.


Hughes v. Nw. Univ., 595 U.S. 170 (2022)